Every once in a while, you read something stunning. Something that's brilliant, changes the way you think about something, or simply shocks you. Here are 10 such quotes I came across over the year, in no particular order of importance.
James Surowiecki, The New Yorker, on the May 6 flash crash
"I don't think yesterday's crash is evidence the market is irrational. It's more that it's a-rational: the computers aren't panicking or herding. They're just following simple rules. I think this is bad for the collective intelligence of the market, which really depends on diversity of thought and independence of action."
Martin Wolf, Financial Times, on the Fed's QE2 program not risking hyperinflation
"The hysterics [say] that it is impossible to shrink the Fed's balance sheet fast enough to prevent excessive monetary expansion. That is ... nonsense. If the economy took off, nothing would be easier. Indeed, the Fed explained precisely what it would do in its monetary report to Congress last July. If the worst came to the worst, it could just raise reserve requirements. Since many of its critics believe in 100 per cent reserve banking, why should they object to a move in that direction?"
Michael Elliott, Fortune, on America losing its global dominance
"The National Academies breathlessly reports that China is now No. 2 in the world in publication of biomedical research papers. To which the only possible response is, 'Duh! Did you think one-fifth of the world's people were all stupid?'"
Ambrose Evans-Pritchard, Telegraph UK, on deflation amid hysterical inflation fears
"The yield on two-year Treasuries fell to an all-time low of 0.5765pc on Friday. It's Weimar, all right: circa 1931, not 1923."
Lobbyist Andrew Lowenthal on the fear of big government
"I don't think our government is the problem. Most people don't worry about government on a day-to-day basis. That's a good thing. In countries with dysfunctional governments, people have to think and worry about their governments every day, not knowing what's going to be seized or confiscated. It's not like that here, whether people pretend it is or not.
"That's one reason I'm very bullish on America. There's a lot of uproar right now, but this is nothing new. There's never been a time in history when we haven't thought that we were at the brink of the end of the world. Never. Every election I've ever been involved with has been 'the most important election in history.' At some point it's not. It's just the path of history. There's this fear that we're going to hand over our lives to JPMorgan Chase, Goldman Sachs, Bank of America, and Citigroup. That just isn't going to happen. It's not that bad out there, folks."
Marc Faber on delusions of grandeur in the U.S.
"In the U.S., we still think that we are the largest consumer market in the world. For some services we are, but in general this is the wrong way to look at things.
"There are huge differences in how statistics between countries are produced. For one, the U.S. is the most leveraged. Other countries factor this in. Also, consumption in the U.S. is 70% of GDP, but it's almost all on domestic services. Spending on actual goods is only 20% of consumption. In the U.S., we spend $600 billion a year on defense. But $300 billion of this goes to personnel and retiree costs. In China, the cost of personnel is basically nothing. When you adjust for purchasing power, China probably spends about what the U.S. does on military capital.
We also think that we have all the knowledge of the world. We think that's our edge. But knowledge in countries with much larger populations have the edge. Research now is being done in Asia because it's cheaper there. Companies like Intel, IBM, and Microsoft are researching in Asia. It's just so much cheaper there. And they are smarter than the U.S. in many ways, too."
Felix Salmon, Reuters, on sovereign defaults
"The best predictor of future default is simply past default: credit ratios tell you almost nothing. The UK managed to get through debt-to-GDP levels of 240% without defaulting or even inflating the debt away in the early 19th Century, while Russia defaulted in 1998 with a debt-to-GDP ratio of just 12.5%."
Ezra Klein and James Galbraith, The Washington Post, on the risk of the U.S. will default
"EK: You think the danger posed by the long-term deficit is overstated by most economists and economic commentators.
JG: No, I think the danger is zero. It's not overstated. It's completely misstated.
EK: Why?
JG: What is the nature of the danger? The only possible answer is that this larger deficit would cause a rise in the interest rate. Well, if the markets thought that was a serious risk, the rate on 20-year treasury bonds wouldn't be 4 percent and change now. If the markets thought that the interest rate would be forced up by funding difficulties 10 year from now, it would show up in the 20-year rate. That rate has actually been coming down in the wake of the European crisis.
So there are two possibilities here. One is the theory is wrong. The other is that the market isn't rational. And if the market isn't rational, there's no point in designing policy to accommodate the markets because you can't accommodate an irrational entity."
Michael Lewis, Vanity Fair, talking with a Greek tax collector
"'In 2009, tax collection disintegrated, because it was an election year.'
'What?'
He smiles.
'The first thing a government does in an election year is to pull the tax collectors off the streets.'
'You're kidding.'
Now he's laughing at me. I'm clearly naive."
Former AIG derivatives chief Joseph Cassano on his biggest error at AIG
"When I think about the single error that may have been made by me I think how when I retired I didn't volunteer to be the chief negotiator for the collateral calls. You need to use all available rights by you. I believe I would have been able to negotiate substantial discounts on the collateral calls and enable the company to preserve that cash. Even in September [2008], I could have gone to the counterparties and negotiated and prevent the taxpayer from spending $40 billion. I would have negotiated a much better deal for the taxpayers than what the taxpayers got."
Got any of your own? Share 'em in the comment section below.
Fool contributor Morgan Housel owns shares of Microsoft and Bank of America preferred. Intel and Microsoft are Motley Fool Inside Value selections. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended buying calls on Intel. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Bank of America, International Business Machines, JPMorgan Chase, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
